Save time with our cheat sheets, fact sheets, checklists & books!

February 15, 2021

What is a Qualified Trust beneficiary for IRAs? Find out here

Your Guide

Share on print
Print
Share on facebook
Share on twitter
Share on pinterest
Share on linkedin

Definition

A qualified trust beneficiary is a trust that satisfies the requirements so as to be treated as a designated beneficiary.   For retirement accounts inherited before 2020, the life-expectancy of the oldest trust beneficiary’s would be used for life-expectancy distributions. For retirement accounts inherited after 2020, the 10-year rule would apply to a trust that is  designated beneficiary, and the life-expectancy option would be available only if the trust is an eligible designated beneficiary.

A trust is a qualified trust if it meets the following requirements:

  1. The trust is a valid trust under state law, or would be but for the fact that there is no corpus.
  2. The trust is irrevocable or will, by its terms, become irrevocable upon the death of the employee.
  3. The beneficiaries of the trust who are beneficiaries with respect to the trust’s interest in the employee’s benefit are identifiable
  4. The trust documentation, showing the designated beneficiary as of September 30 of the year follow the year of death,  has been provided to the plan administrator or IRA custodian/trustee by October 31 of the year following the year-of -death. There must be an agreement to provide the IRA custodian/plan trustee of any future  amendment made to the trust.  As an alternative to providing a copy of the trust, the following can be provided:
    • A list of all of the beneficiaries of the trust (including contingent and remaindermen beneficiaries with a description of the conditions on their entitlement sufficient to establish that the spouse is the sole beneficiary) for purposes of section 401(a)(9);
    • A certification that, to the best of the participant’s knowledge, this list is correct and complete and that the requirements for the trust to be qualified ( as noted above( are satisfied  ;
    • An agreement that , if the trust instrument is amended at any time in the future, the participant will, within a reasonable time, provide to the IRA custodian/plan trustee corrected certifications to the extent that the amendment changes any information previously certified; and
    • An agreement to provide a copy of the trust instrument to the IRA custodian/plan trustee upon demand

The participant/beneficiary may look through a qualified trust and use the life expectancy of the oldest beneficiary to calculate RMD amounts.

Referring Cite

Treas. Reg. §1.401(a)(9)-4, Q&A-5

Additional Helpful Information

  • If there are multiple beneficiaries of the trust, and the trust is an eligible designated beneficiary, the life expectancy of the oldest beneficiary must be used [Treas. Reg. 1.401(a)(9)-4, A-5(c)]
  • If the spouse of the participant is the sole beneficiary of the trust, the participant may apply the RMD calculations rules that would apply had the spouse been the direct beneficiary

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

Share on facebook
Share on twitter
Share on pinterest
Share on linkedin
Share on print
More

Keep Learning

Trustee

The definition of a trustee depends on the capacity in which the party is serving. Trustee includes : Banks and trust companies serving as trustees

Credit Shelter Trust ( Bypass Trust)

Definition Trust  established upon the death of the grantor, designed to reduce federal estate taxes, by funding the trust with amounts up to the exclusion

Charitable Remainder Trust (CRT)

Definition A trust where the donor transfers assets to an annuity trust or unitrust. Under a CRT , The pays the donor or another beneficiary

Be among the first to know when

IRA Rules
Change